Wednesday, April 2, 2008

Moody's assigns Caa2 or lower ratings to just 12 percent of the 292 bonds underlying benchmark Markit ABX indexes that UBS analysts expect to default. Both Fitch and Standard & Poor's tag 57 percent of the bonds with equivalent rankings, according to a report from the New York-based analysts yesterday. A rating of Caa2 or CCC is eight levels below investment grade.

The crazy piece of this to me is how this can to continue to persist given all of the recent public acknowledgment of the obvious fact that the rating agencies were a central character in the credit debacle we have been experiencing for the past 9 months.

The report walks through a number of causes for the crisis, with the rating agencies playing a central piece in the puzzle.

As their credibility continues to be undermined it remains to be seen what implications will arise. Hopefully this will create more discipline in the initial underwriting of investments, which to be fair, should not fall on the shoulders of agencies but rather should be conducted by the individuals being compensated to make investment decisions.

In the mean time, the story continues to play out with estimates of total expected losses now ranging from: